Question

Problem 22-3 (LG 22-1) Consider the following balance sheet for Watchover Savings Inc. (in millions): Assets Floating-rate mortgages (currently 10% p.a.) 30-year fixed-rate loans (currently 7% p.a.) $ 68 94 Liabilities and Equity Now deposits (currently 67 p.a.) 5-year time deposits (currently 66 p.a.) Equity Total $109 17 36 $162 Total $ 162 a. What is Watchover's expected net interest income at year-end? (Enter your answer in millions rounded to 2 decimal places. (e.g., 32.16)) b. What will be the net interest income at year-end if interest rates rise by 1 percent? (Enter your answer in millions rounded to 2 decimal places. (e.g., 32.16)) c. Using the one-year cumulative repricing gap model, what is the change in the expected net interest income for a 1 percent increase in interest rates? (Negative amount should be indicated by a minus sign. Enter your answer in millions rounded to 2 decimal places. (e.g., 32.16)) a. Net interest income b. Net interest income c. Change in net interest income million million million

Answer 1

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

- 2x IA 98 BOND - Microsoft Excel (Product Activation Failed) File Home Insert Page Layout Formulas Data Review View Add-Ins % Cut Σ AutoSum : A Calibri -11AA = = = Dr Wrap Text General Ea Copy Fill Paste B I U B- E A E Merce Merge & Center - Center, $ $ -% % ..00 . Format Painter Conditional Format Cell Insert Delete Format Sort & Find & Formatting as Table Styles 2 Clear Filter Select Clipboard Font Alignment Number Styles Cells Editing HV108 HP HQ HR HS HT HU HV HW HX HY HZ 96 97 a expected net interest income at year end = current expected interest income - current expected interest expense 99 (68 x 10%) +(94x7%) -(109 x6%) - (17 x 6%) 100 5.82 101 102 b expected net interest income at year end if rate rises by 1%= (68 x 11%) +(94 x 7%) - (109x7%) - (17 x 6%) 104 5.41 105 106 C cumulative repricing gap model 107 repricing gap = 68 - 109 = 108 109 change in net interest income if rates rises by 1% 110 -41 x 1% = -0.41 111 112 113 114 HEM YIELD SPOT Sheet2 AFN BANKING NOTE 51 53 CLEAN PRICE $10 BIDDING, UNDERWRITING EUAC AW LIFELP, IP, MRP, INFLATION WARRANT refund 54 55 56 I Rea ferences: FW50 BOU 130% 2. B 19 . * 103 -41 I -_ 0 ENG 27-11-2019